Commentary: Diesel Deserves A Second Chance

It costs less and blows by gas on mileage but faces serious roadblocks in the U.S.

The fuel gauge in a diesel-powered Mercedes (DCX ) E320 resembles a digital thermometer. When the tank is full, a black bar rises to the top of the strip. Right now, my fuel gauge is at the bottom, as though it were five degrees outside. That's appropriate, because as I pull out of the third filling station that sells only gasoline, the gauge seems to be telling me the search for diesel has grown cold. When I finally find some, there are lines for the two pumps, one of which fits only tractor trailers.

This is one big reason the E320 diesel may be the coolest car you'll never drive. What a shame. This is a great ride. It doesn't have the soot-laden exhaust and loud clattering that turned millions of Americans off diesel-powered cars in the 1980s. Its acceleration and torque beat a gasoline-fueled E320, with fuel economy of 32 miles per gallon instead of 22. I drove for six days and about 500 miles before needing more fuel -- which was 10 cents a gallon cheaper than regular gasoline.

Diesel could be a great way for America to balance its burning desire for fast cars and big trucks with its urgent need to cut consumption of imported oil. If the federal government doesn't explore diesel's potential for better fuel economy, it won't take off as it has in Europe, where nearly half of all cars burn it.

Diesel is challenged on several fronts. Environmentalists and some U.S. lawmakers worry that the emissions cause lung cancer and other ailments. Washington favors hydrogen cars and gasoline-electric hybrids. As a result, oil companies aren't installing more diesel fuel pumps, and carmakers aren't developing more engines for the U.S. market. "For the majority of the public, diesel isn't even on the radar," says James N. Hall, vice-president of AutoPacific Inc.

Indeed, only the European auto makers are keeping diesel cars on the roads in the U.S. They sell them in Europe, where gasoline costs double the $2 a gallon that Americans pay. Here, Mercedes started selling the E320 in April after a five-year absence from the market, and expects to sell 3,000 in 2004. Volkswagen has a fast diesel engine in the Golf, Jetta, Beetle, Passat, and the Tuareg SUV -- totaling about 30,000 units a year. DaimlerChrysler will sell a diesel-powered Jeep Liberty SUV, and BMW is considering exporting its diesel 740 sedan.

Emissions are the knottiest barrier to acceptance. Diesel engines inject petroleum-based diesel fuel into a chamber that is already filled with air compressed at higher pressure than in a gasoline engine. This generates more heat -- enough to ignite the fuel without spark plugs -- and provides a powerful kick. Diesel engines are more efficient than gas engines, but they release more particles that have been implicated in a variety of lung diseases, including cancer. They also emit nitrogen oxides, or NOx, a key component of smog.

Europeans make a good case that technology and legislation can clean diesel up. The new diesel engines arriving from Europe have particulate traps that filter out most of the dangerous particles. Those cleaning devices, however, don't work in the U.S. because of the high sulfur content in the fuel -- 500 parts per million, compared with 15 ppm in Europe. Yet by 2006, laws aimed at drastically reducing emissions from millions of diesel trucks and buses on U.S. roads will bring America's standards for sulfur content in line with Europe's. And for cars, German parts maker Bosch will sell a particulate trap that filters up to 98% of the carcinogenic particles from low-sulfur fuel exhaust.

Will that be enough? It depends on whom you ask. A 2003 study by the Boston-based Health Effects Institute concluded that exposure to diesel exhaust poses a small cancer risk. But even at low levels, the exhaust may cause asthma and other respiratory diseases, according to Dr. Tomas Sundstrom, a Swedish respiratory expert who worked on the study.

MORE FUN. European carmakers are sanguine. Mercedes and Volkswagen say that with low-sulfur diesel fuel, they will be able to meet California's 2007 clean-air regulations -- which means that diesel fumes would be no dirtier than gasoline exhaust. At such levels, the risk of cancer for people exposed to the fumes should be very low, says the California Air Resources Board, even if one assumes a significant increase in diesel traffic. And as the Environmental Protection Agency tightens standards on diesel, it will force cars sold here to be cleaner than in Europe, says Margo T. Oge, director of the EPA's Office of Transportation & Air Quality.

NOx regulations are another hurdle. Special catalytic converters can lower NOx emissions from diesel and can be combined with particulate traps for a premium of $3,000 over a gas-burning car. Still, U.S. auto makers balk. Running the numbers, Ford Motor Co. (F ) scrapped plans for its diesel Focus compact. "At that cost, you may as well make a hybrid," says Lawrence D. Burns, General Motors Corp.'s (GM ) vice-president of R&D.

Burns is right, but diesel has another advantage. Hybrids such as Toyota Motor Corp.'s (TM ) Prius can get a 40% improvement in fuel economy, like some diesels. But they're not as fun to drive as a diesel Passat or Mercedes E320. Mercedes wants to make performance a selling point and is trumpeting the car's massive torque, better fuel economy, quiet ride, and reduced trips to the gas station in its marketing efforts.

For now, hybrids have a momentum that diesel can't duplicate. But if German auto companies can bring diesel emissions into line with those from a gasoline engine, diesel would finally get a fair shot in the market. After all, the new generation of diesel engines runs clean enough for Europeans and fast enough for Americans.

By David Welch

With Gail Edmondson in Frankfurt

    Before it's here, it's on the Bloomberg Terminal.